When fund-raising is a crime

A death sentence for a young businesswoman chills entrepreneurs

IN THE odd way these things work in China, word has trickled out that on April 7th an appeal court in Zhejiang, a famously entrepreneurial coastal province, conducted a five-hour hearing on a death sentence handed down to Wu Ying, a prominent 29-year-old businesswoman, on fraud charges. Before her arrest Ms Wu had seemed to personify the miraculous business success that could be achieved by people from even the most humble background in modern China.

The revelation that she faces execution is the latest in a string of dramatic events surrounding her case, including the arrest of several prominent bankers and officials from information she is said to have given, and her own reported suicide attempt. Details are murky because much of the case, including the appeal, has taken place behind closed doors, with restrictions on direct press coverage. That, however, has not stopped Chinese newspapers and internet opiners from discussing avidly a case that has clearly caught the public interest.

If any point is beyond dispute, it is that Ms Wu was a dynamo. She dropped out of secondary school and started a string of beauty parlours whose primary product was the use of animal-placenta injections to achieve the same sort of skin-smoothing effect for which collagen is used in the West. Within a few years she was reported in China Daily to have assembled a business empire that spanned spas, hotels and property. Her net worth was then said to exceed 3.8 billion yuan ($576m).

It all began to crumble when Ms Wu was detained in 2007, but a conviction did not come until December 2009, a particularly long delay that many believed was caused by efforts to broaden the investigation to include other prominent people. Ultimately, she was convicted of “illegal fund-raising” for, the court concluded, raising 773m yuan from illicit sources. In an effort to mitigate her sentence, in the appeal Ms Wu changed her plea from innocent to guilty of “fund-raising fraud”, a lesser charge. Since her initial trial three other people have received long jail sentences in related cases, two of whom had ties to the vast Agricultural Bank of China and one to the Communist Party.

The case struck a nerve across the country, and not just because of the severity of the sentence and the fame of the accused. What she was convicted of was raising and pooling money outside the official system, which is common among Chinese entrepreneurs. There has been much speculation about why she was singled out. Perhaps it was that her promises to investors of annual returns of up to 80% seemed just too good, to the authorities, to be genuine. It is also possible that she lent on the money she received at even higher rates, and the borrowers, unable to pay, used their political connections to have her arrested.

China's entrepreneurs are left with plenty to worry about. Many have to rely on a form of financing that now seems to be interpreted by the courts as a grave crime. The distinction between being a successful tycoon and being an enemy of the people has been blurred, a step back to the days when China was communist in more than just name.